The sector looks after 23% of UK households’ savings, and the plan says societies generated £4bn in “member benefits” through rates and rewards.

Societies now account for 35% of UK branches and were the last branch in town in 122 places.

The plan calls for better access to mutual growth capital, including changes linked to Core Capital Deferred Shares (CCDS) and widening who can invest. It also asks the Bank of England/Prudential Regulation Authority (PRA) to review how capital rules apply to mutuals and supports simpler approaches for firms with simpler models.

It calls for routine review and updating of building society law (including funding and lending limits, and stronger protections of mutual status), plus it also asks for a shift in how regulators consider mutuals.

Mortgage Strategy asked Iain Kirkpatrick, CEO of Market Harborough Building Society (IK) and Chris Hunter, Deputy Chief Executive of Darlington Building Society (CH) to share their views on the report and its findings:

What does “growth” mean for your society, what’s the biggest limit on your growth right now and how do you protect member value while you grow?

IK: For MHBS, growth means positively impacting our community rather than just increasing numbers. We aim to create opportunities, build stronger community connections, and support local wellbeing through initiatives like the £250k Thrive Forward Programme, which is focused on helping young people in important areas such as mental health, financial resilience, and employability. By actively participating in volunteering, sponsorships, and events, we make our impact visible in Market Harborough and surrounding areas.

Our main growth limitation is maintaining sustainable financial returns amid sector-wide margin compression. Fluctuating interest rates and increased competition reduce lending margins, making it harder to offer attractive products and stay financially strong. To protect member value, we need to generate income innovatively and make prudent lending decisions.

CH: Darlington Building Society has recently surpassed £1bn in total assets, meaning the business has effectively doubled in size in the past eight years. For mortgages, we’ve passed £100m in net lending in 2025 which represents a 13% growth – the largest in our 170-year history.

Our long-term strategic ambition is to continue to achieve around £100m net lending per year, and double in size every 7-10 years.

One of the biggest limitations to this growth currently is the uncertainty of the market. Post-covid we have lost the seasonality of mortgage activity, and it has become an “always on” effort requiring constant evolution of products and criteria to stand out against stiff competition. This competitive market is set against a backdrop of cost-of-living challenges, geopolitical pressures, lack of housing stock, and a reducing Bank Rate, all of which affects the psychology and activity of buyers..

Where could the FCA do more to support fair competition between mutuals and banks?

IK: We welcome the FCA’s ongoing support for the mutual growth agenda. The biggest opportunity for the FCA is in proportionality. Mutuals often face bank-style regulatory burdens despite having simpler balance sheets and strong customer outcomes. Tailoring capital treatment, reporting expectations and supervisory intensity more closely to risk would materially improve competition between mutuals and banks.

CH: The Chancellor’s decision to slash the under 65 Cash ISA allowance from £20,0000 to £12,000 from April 2027 will have a detrimental impact on the wider mortgage market. Building Societies serve the underserved, including a huge proportion of first-time buyers, and depend on the retail inflow from Cash ISAs to fund these mortgages, banks have more access to more diversified funding sources. The sector would appreciate political lobbying or support from the FCA to continue to push to protect the £20,000 limit.

Greater proportionality of regulation is something that would vastly increase competition between banks and mutuals. The PRA implemented its long-awaited “Strong and Simple” capital regime in 2024, delivering simplified prudential requirements for building societies, and smaller banks when it comes to deposit taking. However now we’re looking into greater proportionality in audit and reporting – the substantiative costs for smaller and mid-sized building Societies is disproportionate and arguably prohibitive to maximised levels of lending.

Most building societies work on a simple model of lending to borrowers using retail inflow from savings, so it is difficult to understand why the audit and reporting requirement is the same as large banks who have a much higher product and risk portfolio.

What change would help you most on funding and lending limits?

IK: The most helpful change would be to increase the SME deposit ‘disregard’ within the funding limit and modernise the lending limits in the Building Societies Act. In practical terms, allowing a higher proportion of SME deposits to be excluded from the 50% funding limit would give building societies access to more stable business funding, while updating lending limits would enable that funding to be recycled into SME lending. Together, these targeted changes would remove artificial constraints without altering the mutual model or weakening prudential standards.

CH: The Sourcebook for building Societies has been removed in 2025, with the PRA now using regulation on a competency-based approach to risk management. It’s a question of internal risk appetite and the right skills and experience to manage the risks.

Should the law make it easier to take more SME deposits and do more business lending?

IK: Absolutely. Easing restrictions on SME deposits and business lending would empower us to better support local economic growth and offer more choice for small businesses. These changes align with our commitment to fostering a thriving, inclusive financial environment for our communities.

CH: The SME deposit market is difficult due to KYC on directors and trustees. For example, for a charity we need to run checks on all trustees – not just the senior members with signing authority.  I’m not sure there is an appetite to amend the law on this given broader Financial Crime concerns.

What risks worry you most: fraud, bad data, loss of trust, or price pressure?

IK: While all these risks are important, our biggest concerns right now are margin compression and cyber threats. Margin compression puts sustained pressure on our ability to deliver value to members and maintain healthy financial performance, requiring us to be even more innovative and efficient. At the same time, the growing sophistication of cyber-attacks means we must continually invest in robust digital defenses to protect our members’ data and uphold their trust. Balancing these challenges is essential as we continue to grow responsibly and serve our community.

CH: I think all are inherent risks in the modern market, each has its place and weight when assessing our risk appetite:

• Fraud is an advancing risk with the perpetrators getting increasingly clever, so it’s something we work hard to protect both our members and our internal systems against.
• Bad data can slow progress in a growing Society. Particularly at the crux of transformation, when migrating to newer technology and developing products. However this again is managed risk that’s calculated and factored into growth plans.
• Loss of trust is an intangible but very powerful risk factor, as it’s incredibly difficult to retrieve. We take careful and relative precautions both in our daily operations and in our wider scalability plans to ensure that our members are at the centre of our core decisions and the direction in which we take the Society.
• Price pressure has been felt more in the past year or so than in recent times, behavioural anomalies from buyers, cost-of-living pressures driving affordability pressures, an unpredictable housing market, a lack of housing stack driving prices up all contribute to the challenges faced by lenders.

Price Pressure is the largest risk, especially given savings pricing/ competition pressure impacting savings at the same time.  The recent price war that has opened out in the larger mainstream lenders would be a big concern if that permeated to smaller more specialist lenders.

Why do branches still matter to your members?

IK: Branches still serve an important purpose for our members, providing a friendly place for in-person help and working alongside our digital offerings. Having the choice between using physical branches and online services is particularly valuable for members who are vulnerable or facing complicated transactions, as they may need hands-on, personalised support.

By offering both options, we make sure every member can use our services in the way that works best for them, helping everyone feel included and confident in managing their finances. Our planned redevelopment of the Market Harborough branch to include community-space flats and member events reinforces our commitment to accessibility and local engagement.

CH: We’ve found that our members like to have the option of face-to-face interactions for bigger milestone moments, support or complex transactions.

When it comes to asking more complicated questions, or should they come into difficulty, customers prefer telephone or coming into branch to have the reassurance of speaking to a real person. Our branches have evolved into community hubs rather than mere transactional locations, so we continue to invest heavily to adapt our branches for their modern purpose.

What is your main first-time buyer focus right now?

IK: As a specialist lender, we’re not one of the larger players in the first-time buyer market. Instead, our focus is on supporting local first homeowners within our immediate communities through dedicated community initiatives. We have recently purchased seven houses locally for community use in partnership with a housing association, and we are developing our Market Harborough branch to create five flats specifically for local first-time buyers, further strengthening our commitment to accessible housing and community growth.

CH: In 2025, first-time buyers accounted for more than 30% of our lending and are a key proposition for us.

During 2025 we branched out further into foreign currency mortgages and offering mortgages to foreign nationals, working in the UK on a VISA, we offer 6x income for professionals and accept self-employed income, responding to the changing modern workplace and requirements of the market.

Do you run, or plan to run, any rent-to-buy style schemes? What works and what does not?

IK: As part of our ongoing commitment to accessible housing, we are actively exploring a rent-to-buy scheme for the five flats being developed above our Market Harborough branch. This approach could provide local first-time buyers with a practical pathway into homeownership, allowing them to build equity while renting and easing the transition to purchasing. We believe that a thoughtfully structured rent-to-buy program, paired with support from community partners, can address affordability challenges and empower more members to take their first step onto the property ladder.

CH: We have no plans for a rent to buy scheme at present.